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Chain Reaction: Fast-food Account Reviews Snowball To $200 Million in Billings By Scott Hum

CHICAGO – Carl Karcher Enterprises’ decision last week to review the $25 million account for its Carl’s Jr. chain and par

As much as $200 million in billings will have changed hands in these reviews – which include such high-profile brands as Hardee’s, White Castle, Shoney’s, ShowBiz Pizza Time and Sonic – but that’s $200 million and counting, agency and restaurant industry executives say. Economic pressures on both chains and agencies are likely to push more chains into review this fall.
Efforts by McDonald’s and other chains to cut down the number of regional agencies on their roster will only put more agencies with restaurant experience in the hunt and calling on the chains.
‘There’s a ripple effect, as you saw in the airline business when they all changed agencies,’ said Chuck Hodgkinson, vp/advertising & communications for Arby’s Franchise Association and a former Ogilvy & Mather/N.Y. executive. ‘A chain’s going to say, ‘Gee, Goodby and O&M are free. They did some good work; maybe we should talk to them.’ They’ll start looking at their agencies differently, seeing things they may feel they overlooked before.’
Hodgkinson added, however, that Arby’s is completely satisfied with its relationship with W.B. Doner/Baltimore.
The reasons often cited for the rash of reviews: more stores than demand, and too few marketplace positionings.
‘The reviews aren’t surprising,’ says the head of one agency about to lose its restaurant account in a review. ‘Fast-food Row used to be McDonald’s, Kentucky Fried Chicken, Burger King. Now it’s five miles long, but the options are all the same. The pressure to meet the numbers is huge, and (the chains) tend to look at the agency first.’
The number of units operated by the top 100 chains rose at a compound annual rate of 4.9% between 1982 and 1992, higher than their sales growth rate of 4.4%, according to Technomic, Inc. Slumping sales pushed chains to embrace the same price/value positioning, increasing the category’s chronic brand parity.
Customer traffic for fast-food during the 12 months ended in May was up an anemic 3%, according to researcher NPD/CREST, below the growth in number of units, and increasing the share battle.
‘There’s more churn because the chains are stepping on each others’ toes more than ever. They have to find ways to differentiate themselves,’ said Brian Goodall, executive vp at Bayer Bess Vanderwarker/Chicago, which handles Boston Chicken, a rotisserie-chicken chain that has set itself apart.
The feeding frenzy also can feed on itself: the more restaurant competitions, the more losing agencies with restaurant research or expertise on their hands.
‘We won’t waste (the work we did),’ promises the head of one agency unsuccessful in one of this year’s reviews.
Copyright Adweek L.P. (1993)